UK home prices in fastest rise since 2024; Iran war ‘clouding the outlook’

[LONDON] UK house prices unexpectedly surged in March, said one of the country’s largest mortgage lenders, as demand appeared to hold up at the start of the Iran war.Nationwide said on Tuesday (Mar 31) that average home values rose 0.9 per cent to £277,186 (S$472,269) in March, up from 0.3 per cent growth the previous month. It was the strongest increase since December 2024 and defied economists’ expectations of no change.The report provides an early snapshot of UK housing demand after the US and Israel launched fresh attacks against Iran on Feb 28, pushing up borrowing costs and bringing turbulence to global markets. It suggests buyers remained resilient in the early days of the conflict. On an annual basis, prices were up 2.2 per cent.However, Robert Gardner, Nationwide’s chief economist, warned that “the sharp rise in global energy prices in response to developments in the Middle East represents a significant shock to the global economy, clouding the outlook”.Capital Economics previously predicted that house prices would climb 3.5 per cent this year, but has now scaled back its forecast in the light of the Iran war. Navigate Asia ina new global orderGet the insights delivered to your inbox.“Depending on how far mortgage rates rise and by how much the economy weakens, prices may rise by a more modest 1 per cent or so, or even stagnate in an adverse scenario,” said Ashley Webb, UK economist at Capital.Lenders are pulling back deals; two-year fixed mortgage rates have soared to their highest in more than 1.5 years. Households are also postponing big-ticket purchases as they brace for a spike in energy bills and the prospect of interest-rate hikes.Private sector data has nonetheless pointed to a positive start to the year for the UK property market, although official figures for January were not as strong – particularly in the capital. SEE ALSOEnglish homes most affordable since 2015, deposit hurdle remainsUK home sales seen taking short-term hit as war damps sentimentThe Bank of England said on Monday that home loans rose for the first time in five months in February.Household finances remain resilient, Nationwide said. Employment has held up, despite a broader slowdown in hiring, debt levels are relatively low, and savings buffers built up in recent years should help cushion new cost-of-living pressures. Most existing mortgage holders are shielded from the immediate impact of higher interest rates, with around 90 per cent on fixed-rate deals. BLOOMBERGDecoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.